Interested in pursuing fixed income outperformance? We have exciting news: Our new 3-in-1 active bond fund—designed for that goal—is now available.
Financial management
Introducing the Vanguard Multi-Sector Income Bond Fund
Learn how our new multi-sector bond fund can be used to complement a core fixed income position in your portfolio.
6 minute read
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January 26, 2023
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What is a multi-sector fund?
Vanguard Multi-Sector Income Bond Fund pursues outperformance with exposure to 3 primary fixed income credit allocations in thoughtfully chosen proportions: 40% U.S. investment-grade (IG) securities, 40% U.S. high-yield (HY) corporate securities, and 20% emerging markets (EM) debt. Allocations will vary based on the portfolio managers’ views. This fund seeks to outperform a transparent benchmark made up of these 3 primary sector allocations. We believe these sectors are areas where active management can add value.
The fund’s credit breakdown
1Source: Vanguard. As of 10/31/2022.
Note: Allocations may vary based on the managers’ views.
How to use in a portfolio
Vanguard Multi-Sector Income Bond Fund is a moderate-risk fund (3 out of 5 on a risk/reward scale)* that may be suited for investors with a relatively long time horizon, who are able to tolerate moderate-to-high short-term fluctuations in price, and who seek a combination of current income and moderate growth potential. This investment is designed to complement a "core" fixed income position; if you’re looking for a core bond holding, you may want to consider Vanguard Total Bond Market Index Fund, Vanguard Core Bond Fund, or Vanguard Core-Plus Bond Fund.
Learn more about our Multi-Sector Income Bond Fund and see if it’s the right fit for your portfolio.
This fund comes with built-in diversification by investing in 3 different sector allocations (IG, HY, and EM). If you’d like more control over how you invest at the sector level, we also offer funds that focus specifically on those 3 individual sectors.
Lastly, this is a taxable bond fund, which means interest payments from this fund will be subject to taxation. For most investors, that means it’s best used in an IRA, Roth IRA, or other tax-protected account. If you’re seeking tax-exempt fixed income exposure, please consider our municipal bond fund lineup.
Comparing Vanguard Multi-Sector Income Bond Fund to Vanguard funds that resemble its underlying components
(Investment-grade (IG) securities, emerging markets (EM) debt, and high-yield (HY) corporates)
1Risk is a measure of how likely it is that you could lose money in an investment. Knowing the risk level you’re comfortable with and the length of time you expect to invest can help you select an appropriate fund for your investing needs. The potential for risk in Vanguard funds can be categorized in levels from 1 to 5.
2Source: Vanguard. As of 10/31/2022.
3Source: Morningstar. As of 10/31/2022. This is a portfolio breakdown weighted calculation that represents the mean credit rating value of the fixed income portion of a portfolio. It can be one of 27 distinct credit rating symbols which use the Morningstar Fixed Income Global Long-Term rating scale. The average value is calculated through the conversion of rating symbols to a numeric scale which are then weighted to determine the average numeric value. This value is then mapped to the corresponding credit rating symbol which is then presented as the measure of portfolio average.
Active management
The fund is managed by Vanguard Fixed Income Group, an experienced portfolio management team with proven expertise and a 40-year track record of producing strong client outcomes in the active fixed income space. Our success remains unparalleled: 94% of our active fixed income funds outperformed** their peer-group averages over the 10 years ended March 31, 2023. Our professional fund managers will exercise discretion in sector allocation and security selection decisions while focusing on the long term.
Low costs
The fund will offer 2 share classes: Investor Shares (VMSIX) and Admiral™ Shares (VMSAX), with expense ratios of 0.40% and 0.30%, respectively, compared with an average expense ratio of 0.45 % for industry peers.± This fund is a sophisticated active fund managed by a world-class team at what we think is a fair cost. Our scale and one-of-a-kind structure allow us to keep costs low while avoiding excessive risk-taking. We’ve worked on honing our active edge, focusing on compounding sources of alpha and smart risk-taking that’s strengthened by our modest fees. This puts us in a unique position to deliver value to active investors. That’s the Value of Ownership.
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*Vanguard funds classified as moderate are subject to a moderate degree of fluctuation in share prices. In general, such funds may be appropriate for investors who have a relatively long-term investment horizon (more than 5 years).
**For the 10-year period ended March 31, 2023, 43 of 44 Vanguard bond funds outperformed their Lipper peer-group averages. Results will vary for other time periods. Only actively managed funds with a maximum 10-year history were included in the comparison. Source: Refinitiv Lipper, an LSEG Business.
±Industry average mutual fund and ETF expense ratio for Morningstar Multisector Bond category: 0.45%. All averages are asset-weighted. Sources: Vanguard and Morningstar, Inc., as of March 31, 2023.
The competitive performance data shown represent past performance, which is not a guarantee of future results. View fund performance
For more information about Vanguard funds or ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.
Vanguard is investor-owned, meaning the fund shareholders own the funds, which in turn own Vanguard.
All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer’s ability to make payments.
Investments in bonds are subject to interest rate, credit, and inflation risk.
High-yield bonds generally have medium- and lower-range credit quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit quality ratings.
Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets.
This information is general and educational in nature and should not be considered tax and/or legal advice. We recommend you consult a tax and/or legal advisor about your individual situation.
Although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund’s trading or through your own redemption of shares. For some investors, a portion of the fund’s income may be subject to state and local taxes, as well as to the federal alternative minimum tax.
When taking withdrawals from an IRA before age 59½, you may have to pay ordinary income tax plus a 10% federal penalty tax.